Multiple choice

Consider the following information pertaining to G & Sons. as on March 31, 2016: Opening inventory was Rs. 15,00,000. Purchases during the year were Rs. 45,00,000. Sales during the year were Rs. 50,00,000. As per physical inventory taken on March 31, 2016, the closing inventory was Rs. 20,90,000. Gross profit on sales has remained constant at 25%. The management of the firm suspects that some inventory might have been taken away by a new employee.

What will be the estimated cost of missing inventory on the close of the financial year and the cost of goods sold during the year?

  1. Rs. 2,65,000 and Rs. 37,50,000

  2. Rs. 2,10,000 and Rs. 39,10,000

  3. Rs. 1,75,000 and Rs. 50,00,000

  4. Rs. 1,60,000 and Rs. 37,50,000

  5. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Gross profit = 50,00,000 x 25% = Rs. 12,50,000 Closing inventory = Opening stock + Purchases + Gross profit - Sales Closing inventory = 15,00,000 + 45,00,000 + 12,50,000 - 50,00,000 Closing inventory = Rs. 22,50,000 Amount of missing inventory = 22,50,000 - 20,90,000 = Rs. 1,60,000 Cost of goods sold = Opening stock + Purchases - Closing stock COGS = 15,00,000 + 45,00,000 - 22,50,000 = Rs. 37,50,000

Keep practicing — related questions